Gazprom rejected partners after new reserves surfaced, paper says

Oct 19, 2006, 17:15 GMT

Moscow - Russian gas monopoly Gazprom excluded foreign partners from its Shtokman deposit after discovering gas reserves there were larger and more accessible than at first estimated, the Kommersant business newspaper reported in Moscow Thursday.

After learning of the larger reserves at the Arctic field and the decreased risks of accessing them, Gazprom decided to 'open the deposit using a different method than planned,' an unnamed company official told the paper.

The deposit is now thought to hold at least 4 trillion cubic metres of gas, compared with earlier estimates of 3.4 trillion cubic metres, according to an unidentified source at the Gazprom-owned Scientific Research Institute for Natural Gas and Gas Technologies.

Gazprom CEO Alexei Miller unexpectedly told state-owned English- language broadcaster Russia Today last week that the company would explore Shtokman alone.

Before Miller's announcement, Western oil majors had been anxiously competing for rights to co-develop the deposit, located 550 metres off northwest Russia in the Barents Sea.

Expected difficult conditions at the site had mandated a need for partners with sophisticated technologies and experience drilling into poorly accessed underwater reserves.

But Norway's Statoil and Norsk Hyrdo, Total of France and U.S. majors ConocoPhillips and ChevronTexaco were informed Gazprom would have sole rights to exploration and construction and that the other companies would be allowed only to construct related infrastructure.

Gas from Shtokman had originally been slated for delivery to the United States, the world's largest gas consumer. But President Vladimir Putin announced in September that it would be sent to Europe via the North European Gas Pipeline, now under construction.

Observers linked the decision to growing political tensions between Moscow and Washington.

Combined with exports from other Russian gas fields, the deposits would cover Europe's gas needs for the next 50 to 70 years, according to the Russian leader.

Putin last week offered to send 50 billion to 55 billion additional cubic metres of gas each year to Germany. At talks in Dresden he told Chancellor Angela Merkel that her country could become Europe's hub for Russian gas.

Germany currently receives 40 billion cubic metres of gas from Russia each year.

During his talks with the German chancellor, Putin alluded to Shtokman holding up to 4 trillion cubic metres of gas. Official estimates for the reserves have still not been released.

The 1,200-kilometre North European Gas Pipeline gas pipeline is due to start operating in 2010.

Russia, which supplies one-quarter of Europe's gas, caused waves of panic throughout the continent after it halted shipments to Ukraine in January over a pricing dispute. Since then, Moscow's reliability as an energy partner has been publicly doubted.